6 B2B SaaS pricing models and which to use

Choosing the right pricing model for your B2B SaaS product is critical. The wrong one can stifle your SaaS growth (or grind it to a halt) — but the right one can help you scale up faster than the competition.

But this goes beyond just the numbers. Picking the correct pricing strategy affects how customers perceive the value you provide, which translates into higher profit margins and higher user retention. 

In our guide, we’ll compare 6 B2B SaaS pricing models to help you decide which best fits your type of business.

We’ll go over:

• 6 popular B2B SaaS pricing models
• Pros and cons for each one of them
• A quick guide to help you choose the right model
• Some pitfalls to avoid when making your choice

Let’s begin.

The 6 most popular B2B SaaS pricing models 

Choosing the right pricing model for your SaaS product is crucial. It's about more than just the numbers — your strategy affects how customers perceive the value you provide and, ultimately, drives your revenue. Let's explore six common options:

1. Flat-rate pricing

With flat-rate pricing, customers pay a single, unchanging price regardless of how much or how little they use your service. This model strips away any complexity related to usage tracking, instead focusing entirely on your product's overall value proposition. 

Flat-rate pricing works best when you have a very clearly defined target audience and are confident that all features of your SaaS offering hold equal value for that specific customer segment.

Pros

• Ultimate simplicity for customers and your billing processes.
• Can be attractive for solutions targeting a very specific niche with minimal competition and where all features are equally valuable to users.
• The predictable revenue stream for your business.

Cons

• Limits your possibilities for scaling revenue as customer needs and usage grow.
• Difficult to justify if your solution offers features with varying levels of value to different segments of your customer base.
• Risks undervaluing your product if you offer significant value, especially as you add more features over time.

Example: Basecamp, a project management tool, offers this clear pricing for unlimited users and projects.

2. Usage-based pricing

With usage-based pricing, your customers' costs are directly linked to how much they use your product or service.  

The price is determined by measurable actions like the number of transactions processed, the volume of data stored, or other key metrics that clearly reflect the value your SaaS provides. This model ensures that customers only pay for the resources they actually consume.

Pros

• Strong alignment of price with the value customers receive, fostering a sense of fairness.
• Encourages customer adoption and scales well alongside their growth.
• Ideal for solutions where usage patterns can vary significantly between customers.

Cons

• Can be challenging to manage and predict costs, both for you and your customers.
• Requires an in-depth understanding of how your customers use your product to set accurate pricing metrics.
• Customers might be hesitant if they're unsure about their potential usage levels, hindering adoption.

Example: Amazon Web Services (AWS) employs a usage-based model for its vast collection of cloud computing resources.

3. Tiered pricing

Tiered pricing presents customers with a series of packages, each offering a progressively larger set of features and capabilities at increasing price points. 

The goal is to provide logical stepping stones for customers as their needs become more complex and they gain more value from your solution.

Pros:

• Appeals to a wider range of customers with varied budgets and needs.
• Provides a clear upgrade path as customers' needs grow, encouraging higher spending over time.
• Allows you to segment your customers and focus marketing efforts on the package that suits the majority of your target audience.

Cons:

• Requires careful design to ensure features in each tier are both valuable and clearly differentiated
• Doesn't directly cater to very high-volume, high-value users.
• Customers might focus heavily on price comparison between tiers, rather than the overall value proposition.

Example: HubSpot, a marketing and sales platform, offers several tiers ranging from a 'Starter' plan to an 'Enterprise' option.

4. Per-user pricing

With per-user pricing, your customers pay a fee for each individual user who needs access to your software. 

This is often calculated on a monthly or annual subscription basis. The model assumes that a key benefit of your product is enabling collaboration and streamlined workflows within teams.

Pros:

• Transparent and easy for customers to understand and budget for.
• Scalable model – your revenue grows naturally alongside customer adoption.
• Aligns pricing with a core value metric for many SaaS products, as additional users often unlock greater benefits for the business.

Cons:

• Can create friction for adoption within larger organizations, especially if pricing per user is high.
• Encourages users to share logins, potentially limiting your revenue.
• It might not be the best fit for solutions where value is derived from the amount of data processed or actions taken rather than just the number of people with access.

Example: Salesforce, a leading CRM platform, uses a per-user pricing structure.

5. Feature-based pricing

With feature-based pricing, customers have granular control over the capabilities they pay for. Prices are tied to specific features or bundles of features, often in addition to a core subscription cost.  

This allows customers to invest primarily in the areas of your product that directly address their unique pain points.

Pros:

• Provides customers with flexibility to tailor the solution to their unique needs, maximizing the value they get.
• Increases customer retention as they become invested in features specific to their workflow.
• Enables you to upsell and cross-sell additional features over time.

Cons:

• Demands a deep understanding of your product and how customers value different features.
• Feature lists can easily become long and confusing for customers to navigate.
• Requires careful consideration to prevent essential features from being locked behind higher tiers.

Example: Zoom, the video conferencing tool, allows users to add features like webinars, large call capacity, and cloud storage to their subscriptions.

6. Freemium pricing

The freemium model provides customers with a taste of your product by offering a basic version for free.  

This limited version may have reduced functionality, usage restrictions, or lack of certain support features. The goal is to give potential customers enough value to get hooked, enticing them to upgrade to paid tiers that unlock the full potential of your solution.

Pros:

• A powerful tool for lead generation and demonstrating value early on, lowering the barrier to entry.
• Allows customers to try before fully committing, which builds trust and can lead to increased conversions to paying tiers.
• Can create a strong network effect if the free version provides value, even with limitations.

Cons:

• Requires careful thought to ensure the free tier is valuable enough to attract users but distinct enough from paid tiers to drive upgrades.
• Your business model must factor in the potential for high customer support costs associated with a large free user base.
• Not ideal for solutions where the key value is only realized with full access to all features and capabilities.

Example: Slack, the team communication platform, is a well-known example of a successful freemium model. 

How to choose a B2B SaaS pricing model that fits your business

Picking a B2B SaaS pricing model isn't a one-size-fits-all situation. The best strategy for your product depends on a range of factors. Let's break down the key elements to consider:

1. Know your target customer like the back of your hand

Knowing your ideal customer inside and out is the foundation of effective SaaS pricing. This goes beyond basic demographics and firmographics. Here's how to dig deeper:

Identify pain points and goals:

• What are the specific challenges your target customers face that your product addresses?
• What are their desired outcomes or the results they're hoping to achieve?

Grasp how your customers see value in your product:

• What elements of your product are most valuable to different customer segments?
• Are they primarily seeking greater efficiency, cost savings, or new growth opportunities?

Recognize when budget is the issue:

• How much are they realistically able and willing to spend on a solution like yours?
• What are their expectations regarding pricing models within your industry?

Map customer behavior:

• How do they typically use products like yours?
• What usage patterns are common (e.g., frequent but small transactions vs. occasional high-volume usage)?

Some extra key considerations:

• Customer segmentation is crucial. It's unlikely that all of your customers value features and benefits in the same way.
• Don't underestimate the power of customer interviews and surveys. Direct feedback provides invaluable insights into their true needs.
• Regularly revisit your target customer profile as your SaaS offering and the market evolve.

2. Find ways of aligning your solution with the value your customers see

SaaS customers are savvy. They want to know exactly what they're getting in return for their investment. Here's how to align your pricing with delivered value:

• Focus on outcomes, not features: Shift your mindset from simply listing the bells and whistles of your product to highlighting the tangible results customers can expect.  

For example, instead of emphasizing "CRM with Contact Management," frame it as "Increase Sales Conversion Rates by 20%."

• Quantify value whenever possible: Can you associate the benefits of your SaaS with measurable metrics? Examples include:some text
  • Cost savings (e.g., "Reduce operational expenses by $X per month")
  • Increased efficiency (e.g., "Spend 50% less time on manual reporting")
  • Revenue growth (e.g., "Generate X new leads per week")
• Consider value-based pricing: This approach aligns your pricing directly with the value customers receive. The more value they gain, the more they pay.  This model promotes trust and increases customer willingness to invest in your solution.

3. Keep an eye on the market and your competitors at all times

Your product doesn't exist in a vacuum. Understanding the competitive landscape and how you want to position your product is critical in determining the right pricing approach. Consider these points:

Know your competitors:

• How are your competitors pricing their similar solutions? Are they using flat-rate, tiered, usage-based models, or something else?
• Analyze their strengths and weaknesses — where can you provide better value or differentiate your offering?

Establish your unique selling proposition (USP):

• What makes your SaaS solution stand out from the competition? Is it advanced features, exceptional customer support, ease of use, or a focus on a specific niche?
• Your USP should inform your pricing — highlight the areas where you excel compared to competitors.

Target market positioning:

• Do you aim to be the premium, high-value option in your market? Or, do you strive to be the budget-friendly choice?
• Your pricing must be consistent with your desired market position and the perceived value you offer.

Some extra key considerations:

• Price isn't everything. Don't get caught up in a race to the bottom with competitors.  If your product is truly superior, customers may be willing to pay more.
• Conversely, be aware of overpricing your solution. If competitors offer similar value at a lower price point, it hinders customer acquisition.
• Competitor pricing is a helpful benchmark but shouldn't be the sole deciding factor in setting your prices.  Focus on your value proposition and target audience.

4. Consider using a decision matrix as a tool for clarity

A decision matrix simplifies the process of choosing a B2B SaaS pricing strategy by providing a visual and systematic way to evaluate your options against your business priorities. Here's a breakdown of how to use one:

Define your criteria

List the factors that are most critical to your business success. These could include:

• Profitability: Maximizing revenue potential
• Customer acquisition: Attracting a large customer base quickly
• Scalability: Accommodating growth in usage
• Predictability of revenue: Ensuring a consistent income stream
• Ease of administration: Simplicity in managing billing and invoicing

List potential pricing models

Consider all the models we've discussed: flat-rate, usage-based, tiered, per-user, feature-based, freemium, and any hybrid approaches you might be thinking of.

Rate both your criteria and each model

Not all criteria are equally important and your chosen model fits the most important factors to your business success. Here’s how you can do this:

• Assign a weight to each factor (e.g., on a scale of 1-5) to reflect its relative significance in your decision-making.
• Evaluate how well each potential B2B SaaS pricing model aligns with each of your criteria. Use a numerical scale (e.g., 1-5) for consistency.

Calculate weighted scores

For each pricing model, multiply its rating against the weight of each factor. Add up these scores to arrive at a total weighted score.

Analyze results

The pricing model (or models) with the highest scores are likely the most fitting options given your unique business goals and customer profile.

Example scenario of the decision matrix in use

You're developing a new SaaS tool for project management aimed at small and medium-sized businesses. Your primary goals are to maximize customer acquisition and ensure the pricing structure is easy to manage.  

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Imagine these are your criteria and weights:

• Customer acquisition (weight = 4)
• Profitability (weight = 3)
• Ease of administration (weight = 5)
• Scalability (weight = 2)

Here's how a simplified decision matrix could look:

Conclusion: Based on these calculations, the flat-rate pricing model has the highest weighted score, making it the strongest contender for this scenario.

What to avoid when pricing your B2B SaaS product

Choosing the right B2B SaaS pricing model is vital, but it's just as important to watch out for common mistakes that can hurt your profitability and customer relationships. Here are key areas to focus on:

1. Overly complicated pricing structures

• The problem: Confusing customers with a maze of plans, feature add-ons, and obscure usage metrics leads to frustration and slows decision-making.
• Why it matters: Customers crave simplicity and transparency. Complex pricing increases the likelihood of abandoned carts and lost opportunities.
• Pro tip: If you find yourself needing a lengthy FAQ just to explain your pricing, it's likely too complicated. Prioritize clarity over squeezing every penny out of your customers.

2. Undercharging 

• The problem: Setting prices too low, especially early on, can make it difficult to cover costs and reinvest in your product's growth.
• Why it matters: Undervaluing your solution can create a perception of low quality and make it difficult to raise prices later without backlash.
• Pro tip: Don't base your pricing solely on the competitor's prices or on your development costs. Focus on the value you deliver to your customers.

3. Skipping thorough customer research

• The problem: Pricing without a deep understanding of your target customer’s pain points, budgets, and what they value is a recipe for confusion.
• Why it matters: Customers won't pay a premium for features or capabilities that don't solve their problems or help them achieve their goals.
• Pro tip: Use surveys, interviews, and market research to uncover what your ideal customers are willing to pay and how they prefer to be billed.

4. Using inappropriate billing tools

• The problem: Relying on manual invoicing or billing systems that can't handle the specifics of your B2B SaaS pricing model leads to errors, delayed payments, and revenue loss.
• Why it matters: Inaccurate or inefficient billing practices damage customer trust and create unnecessary administrative burdens for your team.
• Pro tip: Invest in billing tools designed for SaaS businesses. Look for features like automated recurring billing, the ability to manage complex pricing tiers, and accurate usage tracking.

Next steps

Now you should have a better idea about the most popular B2B SaaS pricing models and how to choose the best fit. However, implementing these models and ensuring a smooth billing experience can be complex. 

That's where a specialized billing platform becomes essential.

Orb is a done-for-you billing platform designed to simplify your billing process, accurately track usage, and effortlessly manage a variety of B2B SaaS pricing structures. Here's how Orb supports your pricing model strategy:

• Usage tracking for complex models: Orb carefully tracks a variety of usage metrics, providing the basis for usage-based, tiered, or hybrid models. 
• Handle pricing changes with ease: Orb empowers you to evolve your pricing confidently. Its Plan Versioning feature provides a centralized system for creating new pricing plans, rolling them out smoothly, and managing legacy pricing.
• Billing accuracy at scale: Orb excels in handling calculations, prorations, and adjustments, ensuring invoices remain accurate even as your business or pricing complexity grows.
• Insightful revenue reporting: Orb provides dashboards and granular reports on key financial metrics. Integrations with accounting systems and data warehouses further enhance your ability to analyze pricing-related KPIs.
• Flexible plan management: Orb gives you fine-grained control over plan definitions, billing cycles, and customer subscriptions. This allows you to tailor your monetization to specific needs, even within a usage-based or hybrid model.

Learn more about how Orb can solve all your B2B SaaS billing needs.